Lessons 28 · 1 lessons · E. Sariqov, B. Khaydarov. Foundations of Economics, Grade 8. “Huquq va Jamiyat” Publishing House, Tashkent, 2019
28
Competition
Textbook: pp. 116–119
GoalUnderstands the essence of competition and the conditions for it, tells price from non-price competition and fair from unfair competition, explains how competition benefits buyers, and knows what an auction is.
New words
competition: rivalry arising from the clash of the interests of market participants · raqobatprice competition: attracting buyers by setting a lower price · narx vositasidagi raqobatnon-price competition: attracting buyers by quality, packaging, service or advertising · narxsiz raqobatunfair competition: rivalry that breaks the rules and laws · g‘irrom raqobat
Explanation
Resources are limited, so the interests of market participants clash, and this rivalry is competition. Sellers want to sell more and earn more profit, while buyers look for cheap and good-quality goods. For competition to exist, there must be many sellers and buyers on the market, none of them able to set the price alone, and no barriers to entry for new sellers. In price competition a firm lowers its price; in non-price competition it improves quality, service, packaging or advertising. Rivalry within the law is fair competition; methods such as false advertising, slandering a rival’s goods or using a fake mark are unfair competition, which is forbidden and punished. When sellers compete, buyers gain: prices fall and quality and choice grow. When buyers compete with each other (when goods are scarce), prices rise. In an auction the buyer who offers the highest price gets the item.
Worked examples
There are three bakeries in a neighbourhood. The first lowered the bread price from 4 000 to 3 500 so‘m (price competition). The second kept the price but introduced hot bread and a delivery service (non-price competition). If the first bakery sells 300 loaves a day, it loses 300 · 500 = 150 000 so‘m of revenue per day, but if buyers increase, it can make up the loss.
A shop owner spread the lie that his neighbour’s milk was “poisonous”. This is unfair competition: lies and slander are not healthy rivalry and are against the law. The healthy way is to show the quality of his own milk, improve its price or offer a new service.
Class activity
“Competition scene”: three groups act as sellers of the same item (for example, notebooks) and tell the class how they stand out (price, quality, service); the class judges which methods are fair.
Practice
1
Name two conditions needed for competition to appear.
For example: many sellers on the market; no barriers to entry for new sellers.
2
A shop cut the juice price from 12 000 to 10 500 so‘m (price competition). By how many so‘m did the price fall?
1500
3
If 80 juices are sold a day, what is the revenue at 10 500 so‘m, in so‘m?
840000
4
Why does competition between sellers benefit buyers?
Because sellers lower prices and improve quality and service to attract buyers.